Barriers to Entry and Competitive Behavior: Evidence from Reforms of Cable Franchising Regulations

Show simple item record

dc.contributor.author Bagchi, Sutirtha
dc.contributor.author Sivadasan, Jagadeesh
dc.date.accessioned 2017-11-13T16:41:27Z
dc.date.available 2018-11-01T16:42:01Z en
dc.date.issued 2017-09
dc.identifier.citation Bagchi, Sutirtha; Sivadasan, Jagadeesh (2017). "Barriers to Entry and Competitive Behavior: Evidence from Reforms of Cable Franchising Regulations." The Journal of Industrial Economics 65(3): 510-558.
dc.identifier.issn 0022-1821
dc.identifier.issn 1467-6451
dc.identifier.uri http://hdl.handle.net/2027.42/139114
dc.description.abstract Between 2005 and 2008, nineteen of the fifty states of the U.S. reformed the franchising process for cable television, significantly easing entry into local markets. Using a difference‐in‐differences approach that exploits the staggered introduction of reforms, we find that prices for ‘Basic’ service declined systematically by about 5.5 to 6.8 per cent following the reforms, but we find no statistically significant effect on average price for the more popular ‘Expanded Basic’ service. We also find that the reforms led to increased actual entry in reformed states, by about 11.6% relative to non‐reformed states. Our analysis shows that the decline in price for ‘Basic’ service holds for markets that did not experience actual entry, consistent with limit pricing by incumbents. To control for potential state‐level shocks correlated with the reforms, we undertake a sample‐split test that finds larger declines in prices for both ‘Basic’ and ‘Expanded Basic’ services in local markets which faced a greater threat of entry (because they were close to a prominent second entrant). Our results are consistent with limit pricing models that predict incumbents respond to increased threat of entry, and suggest that the reforms facilitated entry and modestly benefited consumers in reformed states.
dc.publisher Princeton University Press
dc.publisher Wiley Periodicals, Inc.
dc.title Barriers to Entry and Competitive Behavior: Evidence from Reforms of Cable Franchising Regulations
dc.type Article en_US
dc.rights.robots IndexNoFollow
dc.subject.hlbsecondlevel Economics
dc.subject.hlbtoplevel Business and Economics
dc.description.peerreviewed Peer Reviewed
dc.description.bitstreamurl https://deepblue.lib.umich.edu/bitstream/2027.42/139114/1/joie12152_am.pdf
dc.description.bitstreamurl https://deepblue.lib.umich.edu/bitstream/2027.42/139114/2/joie12152.pdf
dc.identifier.doi 10.1111/joie.12152
dc.identifier.source The Journal of Industrial Economics
dc.identifier.citedreference Reardon, M., 2006, ‘AT&T Enters TV Market,’ January 5, 2006, CNET News, ( https://www.cnet.com/news/at-38t-enters-tv-market/ ).
dc.identifier.citedreference Rogers, C., 2008, ‘Cable Giant’s Competition Benefits Users,’ Detroit News, July 7, 2008, (Detroit News. Detroit, Michigan, U.S.A.)
dc.identifier.citedreference Rubinovitz, R. N., 1993, ‘ Market Power and Price Increases for Basic Cable Service since Deregulation, ’ The RAND Journal of Economics, 24 ( 1 ), pp. 1 – 18.
dc.identifier.citedreference Savage, S. J. and Wirth, M., 2005, ‘ Price, Programming and Potential Competition in U.S. Cable Television Markets, ’ Journal of Regulatory Economics, 27 ( 1 ), pp. 25 – 46.
dc.identifier.citedreference Schneider, C., 2007, ‘The Benefits of Cable Competition in Wisconsin,’ Wisconsin Policy Research Institute report, ( http://www.wpri.org/WPRI-Files/Special-Reports/Reports-Documents/Vol20no4.pdf ).
dc.identifier.citedreference Seamans, R. P., 2012, ‘ Fighting City Hall: Entry Deterrence and Technology Deployment in the Cable TV Industry, ’ Management Science, 58 ( 3 ), pp. 461 – 475.
dc.identifier.citedreference Seamans, R. P., 2013, ‘ Threat of Entry, Asymmetric Information, and Pricing, ’ Strategic Management Journal, 34 ( 4 ), pp. 426 – 444.
dc.identifier.citedreference Sher, A., 2008, ‘Spending in AT&T Cable Fight Approaches $18 Million,’ Chattanooga Times/Free Press, McClatchy‐Tribune Regional News, 30 May 2008, (The McClatchy Company, Sacremento, California, U.S.A.)
dc.identifier.citedreference Simon, D., 2005, ‘ Incumbent Pricing Responses to Entry, ’ Strategic Management Journal, 26 ( 13 ), pp. 1229 – 1248.
dc.identifier.citedreference Spiwak, L. J., 2006, ‘ Competition’s Calling, ’ Legal Times, 29 ( 11 ).
dc.identifier.citedreference Spurgin, J. T., 2008, ‘State Video Franchise Law: State of Art or State of War?,’ American Public Works Association handout, ( http://beta.apwa.net/Resources/Reporter/Articles/2008/8/State-Video-Franchise-Law-State-of-Art-or-State-of-War ).
dc.identifier.citedreference Sura, A., 2006, ‘Telecom Competition Comes to Indiana,’ Heartland Magazine, ( https://www.heartland.org/news-opinion/news/telecom-competition-comes-to-ind ).
dc.identifier.citedreference Sutton, J., 1991, Sunk Costs and Market Structure ( The MIT Press, Cambridge, Massachusetts, U.S.A.).
dc.identifier.citedreference Todd, P. E., 2008, ‘Matching Estimators,’ The New Palgrave Dictionary of Economics. Second Edition. (eds.) Steven N. Durlauf and Lawrence E. Blume, ( Palgrave Macmillan, New York, U.S.A. The New Palgrave Dictionary of Economics Online).
dc.identifier.citedreference Wagter, H., 2010, ‘Fiber‐to‐the‐X: The Economics of Last‐Mile Fiber,’ Ars Technica, March 31, 2010, ( http://arstechnica.com/tech-policy/2010/03/fiber-its-not-all-created-equal/ )
dc.identifier.citedreference Warren Communications, 2004 ‐2010, Cable TV Factbook, (Warren Communications, Washington, District of Columbia, U.S.A.)
dc.identifier.citedreference Yamawaki, H., 2002, ‘ Price Reactions to New Competition: A Study of the U.S. Luxury Car Market, 1986–1997, ’ International Journal of Industrial Organization, 20 ( 1 ), pp. 19 – 39.
dc.identifier.citedreference Angrist, J. D. and Pischke, J., 2009, Mostly Harmless Econometrics ( Princeton University Press, Princeton, New Jersey, U.S.A.).
dc.identifier.citedreference Bain, J., 1956, Barriers to New Competition ( Harvard University Press, Cambridge, Massachusetts, U.S.A.).
dc.identifier.citedreference Balasubramanian, N. and Sivadasan, J., 2009, ‘ Capital Resalability, Productivity Dispersion, and Market Structure,’ The Review of Economics and Statistics, 91 ( 3 ), pp. 547 – 557.
dc.identifier.citedreference Barrett, R., 2008, ‘Video Franchise Law no Boon to Consumer,’ Milwaukee Journal Sentinel, ( http://www.jsonline.com/business/34126204.html ).
dc.identifier.citedreference Behrman, J. R.; Cheng, Y. and Todd, P. E., 2004, ‘ Evaluating Preschool Programs when Length of Exposure to the Program Varies: A Nonparametric Approach, ’ The Review of Economics and Statistics, 86 ( 1 ), pp. 108 – 132.
dc.identifier.citedreference Bertrand, M.; Duflo, E. and Mullainathan, S., 2004. ‘ How Much Should We Trust Differences‐in‐Differences Estimates?, ’ The Quarterly Journal of Economics, 119 ( 1 ), pp. 249 – 275.
dc.identifier.citedreference Besley, T.; Persson, T. and Sturm, D. M., 2010, ‘ Political Competition, Policy and Growth: Theory and Evidence from the U.S., ’ The Review of Economic Studies, 77 ( 4 ), pp. 1329 – 1352.
dc.identifier.citedreference Bohanon, C. and Hicks, M. J., 2010, ‘Statewide Cable Franchising and Broadband Connections,’ Ball State Department of Economics working paper, (Ball State University, Muncie, Indiana, U.S.A.).
dc.identifier.citedreference Bolema, T., 2008, ‘Local, State and Federal Cable Franchise Regulation,’ Mackinac Center for Public Policy ( https://www.mackinac.org/10118 ).
dc.identifier.citedreference Braunstein, Y. M., 2008, ‘Expected Consumer Benefits from Wired Video Competition in the City of San Francisco,’ working paper ( https://www.ischool.berkeley.edu/research/publications/2008/expected-consumer-benefits-wired-competition-city-san-francisco ).
dc.identifier.citedreference Bureau of Labor Statistics, 2013, ‘American Time Use Survey‐2012 Results,’ (Bureau of Labor Statistics, Department of Labor, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference Chipty, T., 2001, ‘ Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry, ’ The American Economic Review, 91 ( 3 ), pp. 428 – 453.
dc.identifier.citedreference Chu, C. S., 2010, ‘ The Effect of Satellite Entry on Cable Television Prices and Product Quality, ’ The RAND Journal of Economics, 41 ( 4 ), pp. 730 – 764.
dc.identifier.citedreference Crawford, G. S., 2000, ‘ The Impact of the 1992 Cable Act on Household Demand and Welfare, ’ The RAND Journal of Economics, 31 ( 3 ), pp. 422 – 450.
dc.identifier.citedreference Crawford, G. S., 2008, ‘ The Discriminatory Incentives to Bundle in the Cable Television Industry, ’ Quantitative Marketing and Economics, 6 ( 1 ), pp. 41 – 78.
dc.identifier.citedreference Crawford, G. S. and Yurukoglu, A., 2012, ‘ The Welfare Effects of Bundling in Multichannel Television Markets,’ The American Economic Review, 102 ( 2 ), pp. 643 – 685.
dc.identifier.citedreference Davidoff, J., 2007, ‘Dems Buck Bill on Video Franchises,’ The Capital Times, Madison Capital Times, Madison, Wisconsin, U.S.A., 7 Nov 2007.
dc.identifier.citedreference DellaVigna, S. and Kaplan, E., 2007, ‘ The Fox News Effect: Media Bias and Voting, ’ The Quarterly Journal of Economics, 122 ( 3 ), pp. 1187 – 1234.
dc.identifier.citedreference Donohue III, J. J. and Levitt, S. D., 2001, ‘ The Impact of Legalized Abortion on Crime, ’ The Quarterly Journal of Economics, 116 ( 2 ), pp. 379 – 420.
dc.identifier.citedreference FCC, 2005, Report on Cable Industry Prices, FCC 05–12, adopted January 14, 2005, released February 4, 2005, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference FCC, 2006, Report and Order and Further Notice of Proposed Rulemaking, FCC 06–180, adopted December 20, 2006, released March 5, 2007, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference FCC, 2007, Second Report and Order 3, Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984, MB Docket 05–311, released November 6, 2007, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference FCC, 2009, Thirteenth Annual Report, FCC 07–206, adopted November 27, 2007, released January 16, 2009, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference FCC, 2011, Report on Cable Industry Prices, DA 11‐284, adopted February 14, 2011, released February 14, 2011, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference FCC, 2012, Fourteenth Annual Report, FCC 12–81, adopted July 18, 2012, released July 20, 2012, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference FCC, 2015, Sixteenth Annual Report, FCC 15–41, adopted March 31, 2015, released April 2, 2015, (Federal Communications Commission, Washington, District of Columbia, U.S.A.).
dc.identifier.citedreference Goolsbee, A. and Petrin, A., 2004, ‘ The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV, ’ Econometrica, 72 ( 2 ), pp. 351 – 381.
dc.identifier.citedreference Goolsbee, A. and Syverson, C., 2008, ‘ How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines,’ The Quarterly Journal of Economics, 123 ( 4 ), pp. 1611 – 1633.
dc.identifier.citedreference Haugsted, L., 2006, ‘State Groups Confront Heavy Lobbying; One Lobbyist per Legislator in Texas,’ 3 April 2006, Multichannel News, MULTN, 27(14), pp. 36–38.
dc.identifier.citedreference Hazlett, T., 2007, ‘ Cable TV Franchises as Barriers to Video Competition, ’ Virginia Journal of Law & Technology, 12 ( 2 ), pp. 1 – 82.
dc.identifier.citedreference Heckman, J. J.; Ichimura, H. and Todd, P. E., 1997, ‘ Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme, ’ The Review of Economic Studies, 64 ( 4 ), pp. 605 – 654.
dc.identifier.citedreference Holmes, T. and Schmitz, J., 2010, ‘ Competition and Productivity: A Review of Evidence, ’ Annual Review of Economics, 2 ( 1 ), pp. 619 – 642.
dc.identifier.citedreference Hopenhayn, H. A., 1992, ‘ Entry, Exit, and Firm Dynamics in Long‐Run Equilibrium, ’ Econometrica, 60 ( 5 ), pp. 1127 – 1150.
dc.identifier.citedreference Joint Study Committee, 1998, ‘Report on Franchise Fees and Conditions, Rights of Way & Tax Implications of Competitive Markets,’ ( http://www.senate.ga.gov/sro/Documents/StudyCommRpts/98JtFranchiseFeesRpt.pdf ).
dc.identifier.citedreference Kelly, M. T. and Ying, J. S., 2003, ‘ On Measuring Competitive Viability and Monopoly Power in Cable: An Empirical Cost Approach,’ The Review of Economics and Statistics, 85 ( 4 ), pp. 962 – 970.
dc.identifier.citedreference Klemperer, P., 1987, ‘ Entry Deterrence in Markets with Consumer Switching Costs, ’ The Economic Journal, 97, pp. 99 – 117.
dc.identifier.citedreference Kreucher, J. D., 2008, ‘Still Broken: Michigan’s Video Franchising Law 18 Months Later,’ Michigan Township News, July 2008, pp. 18–24 (Michigan Townships, Association, Lansing, Michigan, U.S.A.)
dc.identifier.citedreference Lyon, T. P. and Yin, H., 2010, ‘ Why Do States Adopt Renewable Portfolio Standards?: An Empirical Investigation, ’ The Energy Journal, 31 ( 3 ), pp. 133 – 157.
dc.identifier.citedreference Martin, G. J. and Yurukoglu, A., 2016, ‘Bias in Cable News: Persuasion and Polarization,’ working paper, ( http://web.stanford.edu/ayurukog/cable_news.pdf ). (Stanford University, Stanford, California, U.S.A.)
dc.identifier.citedreference Manuszak, M. D. and Moul, C. C., 2008, ‘ Prices and Endogenous Market Structure in Office Supply Superstores, ’ The Journal of Industrial Economics, 56 ( 1 ), pp. 94 – 112.
dc.identifier.citedreference Mazzeo, M. J., 2002, ‘ Competitive Outcomes in Product‐Differentiated Oligopoly, ’ The Review of Economics and Statistics, 84 ( 4 ), pp. 716 – 728.
dc.identifier.citedreference McCann, B. and Vroom, G., 2010, ‘ Pricing Response to Entry and Agglomeration Effects, ’ Strategic Management Journal, 31 ( 3 ), pp. 284 – 305.
dc.identifier.citedreference Milgrom, P. and Roberts, J., 1982a, ‘ Predation, Reputation and Entry Deterrence, ’ Journal of Economic Theory, 27 ( 2 ), pp. 280 – 312.
dc.identifier.citedreference Milgrom, P. and Roberts, J., 1982b, ‘ Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis, ’ Econometrica, 50 ( 2 ), pp. 443 – 459.
dc.identifier.citedreference Nielsen, 2011, Television Audience 2010 & 2011 (Nielsen, 85 Broad Street, New York.)
dc.identifier.citedreference Owen, B. M. and Greenhalgh, P. R., 1986, ‘ Competitive Considerations in Cable Television Franchising, ’ Contemporary Economic Policy, 4 ( 2 ), 69 – 79.
dc.identifier.citedreference Petersen, M. A., 2009, ‘ Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches,’ The Review of Financial Studies, 22 ( 1 ), pp. 435 – 480.
dc.identifier.citedreference Reardon, M., 2005a, ‘Telcos, Cable Companies Face Off Over TV Franchises,’ May 27, 2005, CNET News, ( https://www.cnet.com/news/telcos-cable-companies-face-off-over-tvfranchises/ ).
dc.identifier.citedreference Reardon, M., 2005b, ‘Verizon Switches on TV Service,’ September 22, 2005, CNET News, ( https://www.cnet.com/news/verizon-switches-on-tv-service/ ).
dc.owningcollname Interdisciplinary and Peer-Reviewed
 Show simple item record

This item appears in the following Collection(s)


Search Deep Blue

Advanced Search

Browse by

My Account

Information

Available Now


MLibrary logo